Still a bit up in the air

Still a bit up in the air

Adaptability is key as travel insurers take off into an uneasy post-pandemic world

By Bernice Han

Travel insurance providers have a Herculean task before them: rebuilding their businesses after a COVID-induced nightmare sparked by the Federal Government’s ban on residents leaving the country.

Sales cratered overnight in March last year when Canberra activated its “do not travel” global advisory in response to the pandemic.

The advisory was removed on November 1 this year, the only requirement being that Australian citizens and residents must be fully vaccinated before they embark on their journeys.

The trickle of sales to those who applied and received government permission to leave during the ban was barely enough to blunt the financial blow from the collapse of the leisure and corporate travel market.

Before COVID struck Cover-More earned some $450 million in annual revenues from its 45% share of the share of the Australian travel insurance market. Around 5% of it came from trans-Tasman and domestic business.

Outgoing Chief Executive Asia Pacific Judith Crompton told a Standing Committee on Economics hearing in June that after the ban came into force the Zurich-owned business saw its revenue nosedive to just $4 million a month, made up mostly of domestic and trans-Tasman sales.

“That is now flipped to the other way around,” she said of the pandemic’s impact on the business, which derives 60% of sales from retail demand.

The task of flipping the travel insurance industry back in the right direction – which was worth in excess of $1 billion until COVID came – is now underway, as departure gates at airports around the country start to gradually fill up again after some 18 months of near-total emptiness. The travel insurance sector has mostly adjusted swiftly, adapting its offerings to accommodate COVID-related cover such as medical assistance for policyholders who catch the virus while travelling. The revamps reflect the changed risk landscape in which there is a general acceptance that the virus and its variants may never be eradicated.

However, the emergence of Omicron as Insurance News magazine went to press shows just how volatile it remains for the industry even as it gets used to COVID being a constant, lurking threat. And borders and travel bans enacted in response to significant health or safety risks remain a no-go zone for the industry, the Insurance Council of Australia says. A spokesman tells Insurance News that travel insurers have generally determined these risks are too great to underwrite. Earlier this year Allianz Partners Australia, a major player in the travel insurance sector, launched a new and simplified policy which has been adapted for travel in a COVID world. “Travel has changed dramatically since COVID-19 became a worldwide pandemic,” Chief Executive Chris McHugh tells Insurance News. The business continues to include a general exclusion against epidemics and pandemics, but if an insured is diagnosed with COVID before or during the trip some benefits may apply, subject to terms and conditions. If a traveller contracts the virus before the trip and is unable to travel, Allianz currently includes cover for cancellation of unused travel and accommodation arrangements that cannot be otherwise refunded or re-scheduled. In the event that a policyholder contracts the virus during the trip, medical assistance is available. Should COVID border closures, or mandatory quarantine, shorten or cause a cancellation of travel plans, eligible customers may also be entitled to a partial or full premium refund.

But expenses incurred as a result of a border closure or quarantine due to COVID are not covered, except in limited circumstances such as testing positive for the virus during the period of cover.

At Cover-More, COVID-ready benefits have been offered since December last year for customers going on domestic trips and to New Zealand, a spokesperson tells Insurance News.

The benefits also offer previously unavailable protection for overseas travel to other countries as the “do not travel” advisory is lifted. This includes cover for cancellation if an Australian traveller contracts COVID-19 and is placed into quarantine and cannot start their trip.

Cover-More also provides cover if an Australian traveller catches the virus while on their trip and is hospitalised or placed into quarantine. But the cost of testing is not covered, as that will continue to be part of required travel arrangements.

“We will continue to monitor our travel insurance cover as Australia and the world learns to live and travel with COVID-19,” the spokesperson said. “Cover-More expects considerable pent-up demand from Australian travellers and this has started to manifest as a significant increase in sales volumes for international travel insurance compared to this time last month.”

A spokesman for IAG says its NRMA, SGIO and SGIC travel insurance policies do not provide any cover or benefits for claims related to COVID-19, including all medical expenses, cancellation costs and repatriation costs.

While major travel insurers are no doubt feeling upbeat, that’s not the case with everyone else. Brokers, who arrange corporate travel cover, believe it will take some time for demand to recover fully, due in part to airlines and countries having different testing requirements.

Up and away: but travel comes with added risk

Mercer Marsh Benefits Leader Pacific Sarah Brown says it is difficult to assess how quickly the market will rebound. Insurers are regularly reviewing coverage which is being influenced by community expectations, so care is required to understand individual policy terms and conditions at renewal. “However, we expect an initial spike in domestic and international business travel as business activities resume and return to a new normal following the extended border closures,” she tells Insurance News. “We then anticipate a plateau in travel movements as organisations review their travel management strategies, including the requirement for travel versus the benefits of a virtual presence, viability of international expat assignments, local resource capabilities and COVID-19 restrictions and infection rates. “This travel management strategy will be fluid in accordance with the changing travel and COVID landscape.” Aviso Group General Manager David Bailey says the business, which also offers leisure and expat insurance solutions, has been in touch with its insurer partners to find out where they stand in relation to new underwriting criteria, if any, and exclusions that may apply. “Unfortunately it won’t be simple,” Mr Bailey tells Insurance News, saying the message from insurance partners is “slightly mixed” at present. He says some have “obviously” exited the business while the ones that have stayed on are “very cautious” with their coverage. “The good news is there are options available [with] some that will include cover for COVID-related matters,” he says. “There’s solid underwriting behind it, and hopefully as vaccination rates increase across the globe we’ll be able to provide more options to our clients.”

Howden Partner Corporate Risks Carlie Griggs says the brokerage is seeing a stream of inquiries from clients who are now starting to plan business trips in advance. From what she has seen so far, COVID-related questions are the priority when it comes to corporate travel insurance. “The basic corporate travel policy has certainly changed since the start of COVID,” she tells Insurance News. “Obviously one of the big things for our clients is the safety and wellbeing of their employees, and clients need to make sure they are protecting their employees when they are asked to travel for business purposes.” She says it is the broker’s job to canvass the market to find the best product to suit the client’s individual needs. “At present there are some clear differences with each insurer’s wordings. However, I’m confident that COVID exclusions on the travel policies will slowly start to be removed.” Ms Griggs says Howden has partnerships with many corporate travel insurers, and the broker has been going through the respective product changes to support clients with their cover needs. “It’s important that the exclusions under the policy wordings are explained to the client in detail so the client is clear on what is covered and what isn’t.” Ms Griggs, who is a member of the National Insurance Brokers Association’s New South Wales Divisional Committee, says the availability of COVID-related travel protections demonstrates adaptability on the part of insurers. “It’s a great thing for our industry,” she says. “The insurers have sat down, they’ve done their research and are now in a strong position to say ‘yes, we will cover your clients’. “I think what they are doing is 100% the right thing to do.” Broker-focused insurer TravelCard was among the biggest casualties of the COVID travel ban. Its Australian operations went into hibernation in October last year, and there have been no updates since then. Its website says the business continues to service existing policies and settle valid claims. Hollard, which underwrites the business, declined to respond to questions from Insurance News. When TravelCard launched In Australia in 2018, it was named as the travel insurance provider for broker group Steadfast, and Steadfast Chief Executive Robert Kelly says the broking network will “certainly go back to supporting them” if TravelCard returns to the market. “The people behind the business are really, really good people,” Mr Kelly tells Insurance News. “Brokers and their clients were served tremendously and efficiently.” David McEwan, the Founding Director of brokerage Galvaniize Insurance, agrees travel insurance “isn’t easy” at the moment, with “a lot of declinatures from insurers for anything difficult such as trips to Antarctica”. Actuarial consultancy Finity says the full recovery of the travel insurance industry is a few years away.Written premium volumes in the last financial year remained very low, at 90% of pre-COVID levels, according to the actuarial firm’s latest annual Optima report. “Consumers are still not fully comfortable with the situation out there,” Finity Principal Danielle Casamento tells Insurance News. “They’re still concerned about possible border re-closures and the Delta strain in other places.” “So our view is that it’s a two to three-year project trajectory in terms of recovery.” Ms Casamento says the pandemic disruption has “inevitably but in a positive way” forced the industry to examine its business model and review its offerings in response to heightened consumer awareness of the risks facing them when they are away from home. My Trip Insurance Chief Executive Luke Sawyer says travel insurers will continue to be pressured to find better solutions to fortuitous cancellations and travel disruptions. His company, which provides corporate travel products through travel agencies, has been working on the technology front to design new solutions. “My Trip Insurance aims to be a conduit between the travel and insurance industries,” Mr Sawyer says. “Our software allows an insurer’s technology to read the rules and conditions of a traveller’s booking, thereby getting a very clear understanding of how much risk is attached to the policyholder’s itinerary.” The need to remain adaptable and available is key going forward, and several insurers have already adjusted their policies to add some coronavirus-related cover. Expect insurers to keep adjusting as the pandemic-related risks evolve. Mr Sawyer sums it up when he says travel insurers will continue to be pressured to find better solutions to travel cancellations and disruptions. “Given the complexities involved, innovation will be key and good communication is imperative.”